Marriage Value - What is it?

When a lease is extended, compensation has to be paid to the landlord for the privilege of an extended lease term. The compensation takes into account loss of future ground rent but also loss of freehold value. The value of the freehold will diminish after a lease extension has taken place, as the leasehold shouldn't (in theory) need to extend again for a few generations. In turn, the value of the leasehold also increases, as any potential buyer will be aware that the lease expiry date is significantly further in the future. This compensation is called marriage value

The financial impact of Marriage Value

Marriage value is not applicable when the remaining lease term exceeds 80 years. Immediately upon dropping below 80 years marriage value kicks in, not only having an instant financial impact, but also by accelerating the rate at which the premium increases as the lease term drops, week on week.

Marriage Value Lease

These graphs illustrate why it is so important to extend your lease before it drops below 80 years. Many mortgage providers will not lend on properties with less than 100 years, given the risk that the borrower may allow the term of the lease to drop below 80 years during the mortgage. This makes it difficult to sell or remortgage any lease with a remaining term of less than 100 years.

Marriage Value Impact

Why is marriage value added?

Marriage value is defined at Part 4 of Schedule 13 of the Leasehold Reform, Housing and Urban Development Act 1993. The relevant parts are:

  • Marriage value is the difference between the following amounts, namely;
  • (a) the aggregate of;
  • (i) the value of the interest of the tenant under the existing lease,
  • (ii) the value of the landlord's interest in the tenant's flat prior to the grant of the new lease, and
  • (iii) the values prior to the grant of that lease of all intermediate leasehold interests (if any);

  • and

  • (b) the aggregate of;
  • (i) the value of the interest to be held by the tenant under the new lease,
  • (ii) the value of the landlord's interest in the tenant's flat once the new lease is granted, and
  • (iii) the values of all intermediate leasehold interests (if any) once that lease is granted.
  • Where at the relevant date the unexpired term of the tenant's existing lease exceeds eighty years, the marriage value shall be taken to be nil.

Instruct a professional to calculate the Marriage Value

The marriage value only forms part of the compensation payable to the landlord. We strongly advise that you instruct a professional to deal with the lease extension process including valuation.